Posts Tagged ‘Peak Oil’

Sustainability and CRM

There was an interesting article in the New York Times last week, “When Flying 720 Miles Takes 12 Hours”   about airlines but the subtext was all about CRM, or at least where CRM has to go.  If you know me at all, you know I closely attend to macroeconomics and energy issues and they are all over this article.

The story documented how small regional airlines are having trouble in an economy where fuel prices are rising and there are fewer passengers willing to pay higher prices.  The typical response you’d expect in such a situation is some combination of reducing the supply of seats and raising prices to enable the carriers to at least break even.

The article shows both but this is not a simple exercise from ECON 101.  Higher prices and fewer flights signal stress on the economy because less business is getting done and that’s a downer economically speaking.

A few years ago a Forbes editor, Chris Steiner wrote, “Twenty Dollars a Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better” that postulated what might happen to the economy as fuel prices rise.  We’re right on time with his predictions, but I think there will be much change and dislocation before we see the promised land.

With fuel heading for five bucks a gallon, we are seeing mergers and acquisitions of sick air carriers along with fewer feeder routes according to the Times article and Steiner.  As prices continue to escalate we’ll see fewer short hops and fewer long distance routes as airlines try to hang on.

But also, Steiner thinks places that exist on the end of an umbilical cord filled with jet fuel — Las Vegas, vacation destinations (think ski areas and islands in the sun) — will see a decline in the traffic that brings tourists and their cash.  The immediate fallback position is cars, but gassing up a car that gets 12 or even 20 miles per gallon has already gotten old.

The secondary default position will be to get serious about alternatives and since trains and new cars or especially more hybrids are an expensive proposition the next steep won’t be travel alternatives but conservation in the form of travel reduction.

Just a few weeks ago people were talking about the resurgence in U.S. oil production.  We went from producing 4.95 million barrels of crude per day to pumping 5.75 mbpd and French champagne started flowing.  But the sad reality is that we need 19.2 mbpd every day and while 5.75 mbpd is nice, even getting up to the 9 or 10 mbpd optimists predict would be nice but still leave us quite a bit short.  And those are today’s numbers, they make no accommodation for growth.

Even worse, in 2007 just before the financial meltdown, U.S. crude demand was 20,680,000 mbpd meaning that the recession has done as much to reduce demand as drill baby drill has done for supply.  I dare say reduced demand will be easier to come by than increasing domestic supply.

When we think we have spare capacity we lose track of the longer-term need for alternatives and we stick with what we know.  That’s one reason we don’t have a more aggressive energy and transportation policy.  But when we’re feeling sanguine about energy we’re also riding an economic roller coaster up and then down because higher prices inevitably choke off growth.  So we find ourselves in a position where the economy gets a little better then a bit worse with the peaks never reaching the previous troughs and the moving average is ever downward.

Alternatives do not simply mean smaller cars or windmills.  If you can find a way to do business with fewer energy inputs, you could call it conservation but in reality you are developing an alternative path to profits and that’s where CRM can add so much.

First off, the huge move towards social technologies is one example of using alternatives.  Social (along with analytics) enables us to communicate with and understand customers without jumping on a plane or into a car all the time for a face-to-face meeting.  But there’s more.  We are rapidly approaching a time when the videoconference has to replace at least some face-to-face meetings.  Video conferencing can be easily built into CRM applications and as a stand-alone it is a great way to communicate with people.

Some companies are using video conferencing to knit together enterprises strung together across time zones and supply chains.  Others are embedding video chat into customer service — another good practice because it produces a more intimate interaction and improves the customer experience.

Companies are looking over unified communications solutions right now but few seem to have the interest in pulling the trigger.  That’s to be expected.  Big companies like ATT, ShorTel, Siemens, Cisco and Microsoft are offering solutions though I don’t know any CRM vendor with an eye on the subject just yet.  It’s too bad because I think unified communication is where social was about 5 years ago — on the periphery but moving inexorably into the CRM suite.

Given unified communications’ upside and relatively modest down side it’s a wonder to me why more companies — vendor and customer alike — are not swarming this solution class already.  Business is a game of thrust and counter thrust and everyone must be ready for change or risk being road kill.  This is our next challenge and CRM is right in the middle.

Peak Oil and the Front Office

Posted: July 6, 2011 in CRM
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If you are a regular reader, you know that from time to time I write about things that appear to be tangentially related to CRM — at best.  My favorite alternative to straight ahead research and reporting on CRM is a strange sounding thing called Peak Oil.

For those of you not familiar with the idea, Peak Oil refers to a not so hypothetical ceiling on how much oil we can coax out of the ground daily.  Indirectly it also refers to the fact that we have not found nearly enough oil to replenish supplies we are consuming and we never will.  There’s only so much of it.  While there is undoubtedly oil left in the ground to be exploited there isn’t enough in part because global demand and consumption keeps rising.  That leaves a gap that now goes unfilled daily.

Actually, economics like nature, hates a vacuum and the gap is filled every day by several methods.  First and most obvious is higher prices at the pump, at the supermarket, at the travel agent and just about everywhere else.  As we were all taught higher prices depress demand and higher prices reach deep into everything.  I read a while ago that it takes about seven gallons of petroleum to make a car tire.  Have you bought tires lately?  Rubber, plastics and anything made of a carbon polymer is affected by crude prices.

The second way the vacuum is filled is through clever substitution.  The word “alternative” conjures up jury-rigged contraptions in old movies so I don’t like to use it but alternatives or substitutions can take almost any shape from walking or taking public transportation to eating local to avoid the cost of transportation built into meat and produce.

Economists like the idea of substitutions and they can spot their use in everyday life.  For instance, if beef costs too much demand for chicken and fish might rise as people shift their demand patterns.

Switching from meat to chicken is relatively easy assuming you have a flexible palate.  You store it in the refrigerator the same way as beef and use the same cooking and eating utensils, so it’s no big deal.  You can say that your infrastructure costs for cooking are a wash, which makes the switching easy.

It’s not the same in business.  When it becomes expensive to travel for instance, we tend to pay higher travel prices because switching to something else requires a more serious investment in infrastructure.  But this switching cost drives so much opportunity for front office software makers, especially the cloud companies.

Customer facing applications are the chicken and fish of business for the foreseeable future.  I’ve read reports and books on the subject that indicate the cost of a new energy efficient and alternatives based infrastructure would cost in the neighborhood of $20 trillion.  I expect we will spend that money because we don’t have many choices but it will take years.  It will be the work of a lifetime for people entering the workforce today just as technology has been mine.

If you go to this link you’ll see credible information that Peak Oil happened in 2006, it’s already in our rearview mirrors and it’s why we’re paying high gas prices.  More significantly, the cost of energy is now the most significant determinant of economic wellbeing.  Note that while fuel prices are declining now, so is economic activity.  Energy prices hit a zenith in May, which put the brakes on.  There’s significant latency in the economy but wait till the end of the year and observe.  You won’t like what you find.  There will be lower gas prices but also lower hiring rates and the signs of an emerging downturn.

Meanwhile, back to the alternatives idea.  Some of the most credible alternatives I’ve seen for getting carbon and energy (and their costs) out of front office business processes exist in our industry.  Whether it’s social media and analytics driven customer contact or Web conferences, VoIP or video used as a strategic marketing tool, all the solutions I know of hang off a CRM platform.

I take briefings every day from vendors who are new to the market and from seasoned veterans.  They all have a basic blind spot when it comes to talking about their solutions.  They’re great at telling me what they have and how it works but when it comes to the practical application of their wares, most are tongue-tied.  I tell them that they need to include phrases that start with “So that you can…” as in so that you can save money while delivering on a customer need.

In the front office we’ve moved beyond the early adopter phase for most categories, an exception might be social CRM.  Later adopters are a more conservative lot and tend to ask more often for the return on investment (ROI).  Over the last forty years we’ve automated nearly every aspect of business and usually justified the cost of automation technology through headcount reduction.  In the near future, I expect we’ll be justifying new purchases through cost avoidance related to energy.

What’s interesting to me is that almost all of the technologies introduced in the front office in the last decade will play a role but those roles were hardly envisioned by their creators.

The Interboom

Posted: October 7, 2010 in CRM, Economics, Technology
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Just posted a new white paper — The Interboom.  As the name implies, it’s about a period of time between two economic boom periods.  It’s based on my keynote at CRM Evolution in August, and it’s much more than a discussion of the recession.  The Interboom is about what happens when three key economic drivers slow down, the reactions within the business world and what the front office software industry might be able to do to help us cope.  You can download it here and I’d welcome your feedback.


So the news is that is raising five hundred million dollars so that it can go on a buying spree.  Half a billion isn’t what it used to be but it can still buy a good weekend in Vegas or a nice stable of emerging technology companies.  What would I do with that much money?  Assuming Vegas is off the list, here are a few ideas.

First things first: Why borrow that kind of money when you have about nine hundred million bucks on your balance sheet?  The question answers itself.  You borrow when you can get money at attractive rates and the best time to be a borrower is when you can walk away from a middling deal.  In my humble opinion, they’re borrowing the money because they can and because coming out of a recession is a nice time to pick up some bargains.  A bargain here would be an emerging company with innovative IP and a weak balance sheet.

So what are they likely to do with the cash?

Let’s digress for a moment.  Seems to me that CRM is in need of a makeover.  The economic drivers that I think will be driving business in the next two decades include high and dynamic energy and transportation costs, mature markets and increasingly savvy customers who will not suffer fools.  Companies that expect to be competitive in those conditions will need different and better business processes and the software to support them.  As configured, CRM today gets C’s and D’s when examined against those economic drivers.

First, I would buy technologies that enable a company to substitute social awareness for transportation.  As transportation becomes more expensive and business people travel less, the options are to not do business or to find other means.  I am betting we’ll choose business by other means and that leads to awareness over transportation.  CRM gets a D in awareness so far and that needs to change.  There are enough emerging companies getting close to figuring out awareness in a business context and I’d be a buyer in that market.

Then I would look at the community side of social media.  CRM has been chasing outbound social media with the ardor of a superannuated sophomore with mixed results.  It’s been a one-way street so far and frankly, I am not sure if outbound social media companies know how to dance with CRM.  Inbound or community oriented social media has been another story.  Inbound companies have ignored CRM preferring to think that what they do is different.  It ain’t.  I’d look to buy an inbound community company and take the time to establish the business process support that will make one plus one equal fourteen.

Then there’s video, VoIP and audio.  These technologies offer some great opportunities to CRM but they have to scale and come down a big learning curve pronto.  CRM has to have a native facility for making three to five minute videos on the desktop — with or without people but with narration and other sounds.  They used to be called commercials; we’ll find another name for this narrow cast cousin.  I’d buy some companies in these areas more on speculation at this point but I would still buy for the experience value.

As part of the foray into video we should include a company or technology that supports Web based meetings.  When jet fuel hits eight or ten bucks a gallon (Can you guarantee it won’t?) user groups, training sessions and annual meetings just to name a few meeting types, will migrate to the Web.  It will be a good thing because it will save customers on the costs of travel and enable vendors to hold more rather than fewer big meetings.

Another thing to keep in mind is that Salesforce is not exclusively a CRM company any more.  As a platform company, they need to constantly be mindful of the need to have a well-stocked platform containing all of the tools that business application developers of the near future will need.  Given the economic drivers you can bet that transaction oriented CRM or CRM with a few social refinements will not be enough.

This is not a complete list but like Mark Twain said about a thousand lawyers chained together at the bottom of the ocean, it’s a good start.

There are numerous signs that the economy is strengthening and that the recession may be ending.  The markets are doing better, failed banks are no longer failing and some have even paid back the funds they borrowed from the federal government when they were under water.  Unemployment is still stubbornly high but it is trending down and as a lagging indicator of recovery this indicator is behaving as one might expect.  If all this is true and not some mirage then the year-end and the year ahead could hold some upside surprises and that will be a welcome change.

For some time now I have been thinking about the recovery — what it might look like and what new ideas might come through the wringer of recession to help drive it.  In the recession that followed the dot com bust some powerful ideas emerged that subsequently shaped the business world.  They included on-demand computing and Web meetings.

Prior to the recession on-demand computing was something that a few hardy souls tried because they were fed up with the high cost of software and implementation.  On-demand technology proved to be an important way to tame those costs and in the recovery users at every level discovered its benefits.

The same is largely true for Web meetings.  In my experience, prior to the recession vendors engaged in elaborate press and analyst tours to conduct face-to-face meetings that involved weeks on the road.  I would routinely take two or three briefings in my office daily but all that has largely been replaced by Web briefings.  Vendors still go on the road but much less frequently and I wear fewer professionally laundered shirts as a result.  That’s the funny thing about innovation, you never know what all of the downstream effects will be — and they can be surprising.

So, coming out of this recession I have to ask what technologies or business ideas will emerge and I have my eye on two.  The first is Web based conferences.  Like a Web meeting a Web conference can save a ton of money on travel costs as well as wear and tear on the attendees.  The technology may still have some kinks to work out but I suspect that as vendors and other organizations look for ways to improve communications the demand for Web conferences will grow and the solutions will become more robust.

The second idea that I see percolating is the enhanced use of video in marketing and sales.  Video has the ability to engage customers in ways that product brochures and white papers can’t.  And with tiny URLs or “turls” they can become powerful viral tools.  The technology for creating, editing and distributing video with decent quality is available on the desktop at reasonable cost or even free.

The key to high volume corporate video will be achieving the right production values.  No company that wants to develop video will be eager to shoulder the high costs of hiring actors, voice talent, camera operators, editors and all the rest.  For video to take off we will need to develop skills at documentary filmmaking.  That’s not as hard as it sounds and Ken Burns, the producer of such classics as The Civil War, Jazz and Baseball, has developed a style that can be easily imitated.  I expect that given the constraints of video development in a marketing department, Burns will become even more of a recognized name.

But there’s another reason to consider these and probably other innovations coming out of the recession.  These new ideas also have the advantage of helping to save a great deal of energy, especially energy involved in transportation.  Just before the economy went into the tank last year, we got a glimpse of the energy future with gasoline exceeding four dollars per gallon.

That wasn’t a fluke, it is likely to be a sign of the times for the foreseeable future because global demand for fuel is rising at a two percent annual rate while supply is remaining constant or falling slightly.  So we are faced with an interesting problem.  Fuels are becoming increasingly expensive and the need for Green approaches to modern life are apparent and all around us.  It would make a great deal of sense then for business to engage CRM solutions that reduce the impact of escalating energy costs.  Web conferences do that and video — done well — may be able to help.

So for all those reasons I can easily see the CRM suite expanding again to include these technologies.  Interestingly, even though Green approaches may be desirable for many ecological reasons, it is still economics acting as the driving force for change.

The video frontier

Posted: August 12, 2009 in CRM
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Rolling sustainability into business development isn’t just a marketing ploy.  In the CRM arena it’s an effective way to communicate with more customers and prospects at a lower cost.

Last summer, when a gallon of regular peaked above four dollars per gallon, Beagle Research published a white paper on sustainability and CRM.  I am happy to report that there are many signs in CRM and elsewhere of industries taking the first steps toward more sustainable business.

We began to see changes in the ways we organize our society and work when gas hit four dollars — Americans drove more than a hundred billion miles less in the year ending in November 30, 2008, for example.  But, too often, reducing travel frequently means falling economic activity.  Airlines were nearly crippled when businesses began curtailing travel.  An economic recovery and unrestrained demand will likely mean that the price of oil, and the gasoline and jet fuel from which they are derived, will again rise — beyond four dollars.  With global demand rising and supply peaking it’s hard to see otherwise.

All this went into our thinking last year and one of our conclusions was that front-office business processes needed to become more energy efficient.  Face-to-face sales calls would be curtailed and replaced by greater reliance on Web-meetings and Web-conferences, and enhanced reliance on in-house produced video.

Our ability to make documentary-style (Ken Burns) videos using desktop technology has accelerated very quickly in the past year or two.  While there is no set standard for these clips — and there shouldn’t be — there are numerous examples of CRM-oriented videos coming into the market.  We believe that video production needs to reach down to the sales and marketing departments in the same way that desktop publishing has. Why?

Giving marketing people the ability to produce professional looking video will not replace the need for travel or product slicks, brochures or even white papers.  But video will begin to provide valuable content in a format that is easy to absorb supplementing sales by conventional means.

There are numerous examples of CRM vendors already turning to video as another way to get a message across.  MicrosoftSAP and Oracle all have produced video content that touts their products.  It’s very effective, especially if it is kept short and moving.  A short video might not replace a brochure or a white paper with all the additional detail that only print can provide.  But video can deliver a message quicker and more clearly when an impression is what’s needed.

Video can exist independently on the Web and it is a medium better suited to viral transmission than print.  How many times each day or week do we get some clip passed along to us?  The number might vary, but our experience says it’s increasing.  And what are you more likely to do, read a white paper or watch a video?

The next step is for CRM customers — in all industries — to become fluent in desktop video development, a big step for sure.  We’ve grown accustomed to building and sitting through PowerPoint presentations, most of which are not that good according to Garr Reynolds.  In his book, “Presentationzen,” Reynolds writes about what’s wrong with what used to be called slide shows — too many bullet points, too few pictures to engage the mind, droning voices, and dark rooms.  Worst of all, Reynolds says, is when someone sends the slides or a printout expecting you to derive meaning from all those cryptic bullets.

Better to build a documentary video out of stock photos and voice animation, and then stick it on your Web site or on a public sharing site like YouTube so that the video can sell for you when customers are receptive.  A simple condensed URL or “turl” makes a video viral in ways that slide shows will never be.

I work on a Mac and all of the tools I need are on my computer.  I have not checked Windows lately, but perhaps the latest version has similar tools, if not, they are available and inexpensive for Windows users.

Some might object to widespread video use because letting salespeople develop video can take away too much selling time.  I agree.  Video should be the province of the marketing team and it’s a great way for them to reclaim responsibility for message creation and maintenance.  When salespeople got the ability to make slides, it inevitably led to message degradation — time for marketing to reassert itself.

Out of the last recession we got on-demand computing and Web meetings, each of which became great successes because they save their users a lot of money without degrading their ability to do business.  From this recession Web conferences and in-house video are showing good signs of life.  In a recovery, the high cost of travel will demand alternative solutions.  Video is the next marketing frontier, a natural content carrier for ideas that have to stand on their own.  Early adopters are already engaged; it’s time to familiarize yourself.

The next disruption

Posted: September 17, 2008 in CRM
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Peak Oil is a term that resonates very little with about 95% of the population.  I discovered this by asking a lot of people and getting blank stares.  A few hardy souls ventured a guess and those guesses were not far from reality.  If you take those words to a search engine you will be surprised by the number of hits you get.  I got nearly 5 million hits the first time I searched on the term. 

The on-line community is awash in blogs and publications from experts in the oil industry, economists, investment bankers, geologists, scientists and many others.  Nonetheless, the term has not penetrated the mainstream yet beyond a few ads on TV that talk about the expense of imported oil.

If you are part of the 95%, Peak Oil simply refers to the fact that the flow rate of the world’s oil fields is at or near its maximum.  In other words, there might be plenty of oil “down there” but bringing it to the surface for processing and use is limited by geology and physics (in some cases, politics too).  More importantly, rising demand and decades of poor exploration results indicate that demand will be outstripping supply in the not too distant future.

The experience of the oil industry is that once a peak occurs, the next move is downward and many of the same experts are predicting a decline of available oil at a rate of as much as 4% per year.  Add to that demand increases of, say, 2% worldwide and you can see that oil availability will be a major challenge in the years ahead.

The smart money knows this already.  That’s why people like Warren Buffet and Bill Gates are buying lots of shares of unglamorous low-tech railroads.  It’s also why T. Boone Pickens is such an advocate of wind power and compressed natural gas and Shai Agassi, former SAP executive, started a company dedicated to making electric cars a reality.

To be sure, there is no “energy crisis” per se but there is a tightening in the liquid fuels market – the fact that gas prices came down about half a dollar over the summer provides no real comfort if you consider that prices were half that — well under two dollars — less than eight years ago.  Since our cars, trucks, aircraft, busses and trains run on liquid fuels, it’s worth considering what this all might mean to our economy.  In pure economic terms, I think this would qualify as a disruption in the making.  It’s one of those moments when everything changes and what worked yesterday might not work so well going forward.

As I look at this disruptive moment, my natural reaction is to ask what effect such a disruption might have on business and what CRM might be able to offer in the way of solutions.  In performing my analysis, it became clear to me that there are numerous front office business processes that are highly dependent on energy especially for travel. 

Sales calls are a primary example but they are not alone, there are energy considerations in the call center and marketing departments can do a lot to help take some of the energy footprint out of front office business processes.  Driving or flying to see customers are activities that are highly dependent on energy use and in an environment where the price of fuel is high and volatile, the cost of selling will become more unpredictable and so will profits. 

We have just completed a new white paper, “CRM & Sustainability”, which examines the challenges that this disruptive moment called Peak Oil is about to inflict onthe global economy.  The paper examines ten areas in front office business processes where innovation and entrepreneurship can be applied to develop solutions that both reduce the energy input to front office business processes and improve customer intimacy and operational efficiency.

I do not expect that our list of ten ideas is complete, there must be many more ideas out there too but it’s a start.  Speaking of starting, some of the ideas in the paper reflect concepts already embodied in off-the-shelf, or off-the-Internet, products and services.  Other ideas will need to be built.  The point of the paper is not to prescribe specific solutions and I shy away from naming specific companies.  Instead, I want to spark conversations about the business opportunities inherent in the disruption that will be caused as Peak Oil accelerates. 

I also know that software does not get built over night and while the energy situation today might cause many people to feel sanguine, I know the smart money is always thinking about the future.  It’s time for the CRM industry to think more like Bill Gates and Warren Buffet.